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    “Our aim,” says JOHN RAMAGE, Director of Liquidity & FX Solutions, “is to help Treasurers enhance yield whilst maintaining their company’s core liquidity buffer.”


    In today’s fragile and unpredictable economic climate, it’s perfectly understandable why so many corporates should hesitate about investing their cash surpluses. But the instinct for instant access means they’re frequently forfeiting opportunities for maximising income value from hoarded cash that simply sits in accounts earning little or no interest.


    It’s not simply a question of lost income. What we’ve found is that the existence of a significant inactive cash buffer can also often detract from the need for accurate cash flow forecasting, leading in turn to additional cash management inefficiencies.


    Today’s interest rate environment contributes to this. Treasurers are often securing rates that match or sometimes exceed base or LIBOR. So, relative to these traditional benchmarks, it  feels as if they’re doing well. But, that’s simply because interest rates are currently at such historic lows.


    Our aim is to help Treasurers enhance yield whilst maintaining their company’s core liquidity buffer.To do this, we suggest corporates take a portfolio approach to investment, with a balanced allocation of operational cash in highly liquid vanilla products, and longer term surplus cash in structured deposits,for example.

    Lloyds Bank has developed a revolving fixed-term deposit programme which can stagger cash flows to tie in with a company’s regular need for funds. The idea is to maximise the company’s deposit period to coincide with the days that those bills need to be paid. By individually customising a term deposit option, this simple vanilla type approach can increase yield and flexibility for the company.


    To dramatically improve your return, in my view, means adopting different strategies. If you compare an overnight deposit rate to even a three-month rolling programme on a vanilla instrument, for instance, you might double your return with only minimal impact on your core liquidity buffer.


    Or you could use structured instruments, such as dual currency deposits (DCDs). Holding more than one currency on a defined policy to switch to another at a specified target rate, you might be relaxed about the timing and method of the exchange. DCDs can help boost short-term rates typically between one week and three months.


    At Lloyds Bank, we recognise Treasurers’ need for flexibility. Our deposit accounts range from 15-day and 95-day notice accounts, as well as our longer 185-day and a 366-day notice accounts. They reflect market rate movements whilst offering surety of rate. As well as this, our new e-platform, Arena, means that our customers are able to operate with the flexibility and information they need to manage their deposits effectively.


    Arena combines Money Market Deposits with economic insight to help you make informed trading decisions. It gives you access to live, streaming competitive rates for a range of deposit amounts, enhancing your ability to invest with choice and flexibility on the money markets in multiple currencies.


    You can also view your cash balances and transactions for all your accounts – those registered in Arena and those held with other banks. That visibility and control is crucial and, in an ever-changing environment, can inform strategic revolving deposit decisions to ensure your cash is in the right place at the right time.

5/31/2020 8:27:45 PM